Re: urgent question

Mine,
in 1974-75 the US government had abandoned the tenuous remains of the
gold standard established at Bretton Woods. President Nixon decreed in
1971 that the Fed would no longer deliver one ounce of gold for every 35
dollars presented by foreign central banks. He devalued the dollar to 44
dollars per ounce of gold, and later let it float (the dollar value of
an ounce of gold went speedily up during the following years, reflecting
the declining real value of the dollar, which in turn reflected price
inflation in the US). The price of gold peaked at about $800 in 1980,
but then a vigorous anti-inflation policy was enacted by the Fed,
inflation was reduced, and the price of gold stabilized around $300
where it still remains (with oscillations between $270 and $350,
reaching occasionally as much as $430).
        In this scenario, deflation was not expected. Instead, the US
government negotiated the end of recession by inflationary means,
especially under President Carter. 
        The other effect remarked upon by Kemp, i.e. that "plants 
that proved unprofitable in the recession did not re-open in the
boom:de-insdustrialization had begun. In response to the declining rate
of
profit at home, corporations sought higher profits by transferring
manufacturing facilities to low wage countries" (p.184) also happened
about that time, and was somewhat related, but is not to be confused
with the former. It was bound to happen anyway, by reasons related to
technological change, the gradual development of a world market after
the long period of reconstruction and development since WWII, and the
gradual liberalization of trade and investment that has already started. 

Kemp refers to "de-industrialization" in your quotation, and a word may
be in order about that. Technological change, which in the 18th and 19th
centuries caused the share of agricultural employment to diminish from
about 75% to around 10% of the labor forcer, causes now a reduction also
in the share of manufacturing, as more things can be physically produced
by less people. This does not mean society is less industrial, on the
contrary: there are more industrial goods produced per capita, and
industry itself is subject to constant technical improvement in all
respects. By "de-industrialization" it is often meant that less labor is
demanded to produce those goods, as 200 years before the farm sector
could gradually reduce its demand for labor while rapidly increasing
farm output. This is a process governed by technological progress, and
largely inevitable. It usually involves a protracted transition period,
as large numbers of workers are leaving the manufacturing sector and
find difficult to find jobs in other sectors of the economy (only the
younger and brighter can, while many former blue-collar workers drift
along in long spells of unemployment or underemployment till they retire
or die).

Within the service sector (whose share is the only one increasing) some
services also reduce their share because of automation, while other
services demand increasing amounts of labor. At some point, with
services already absorbing about 70% of the labor force, there would be
a need to create clear subcategories to distinguish between low-tech and
high-tech services, new and traditional, or some other useful
distinctions, instead of having more than 2/3 of the people lumped
together in a large "tertiary sector". This is a subject worth another
thread, however.

The Asian crisis of 1997-98 happened in a totally different
international environment, and I don't think the 1974-75 episode will
throw much specific light on it, beyond the fact that a knowledge of
historical developments and precedents is always useful.

Hector Maletta
Universidad del Salvador
Buenos Aires, Argentina

Mine Aysen Doyran wrote:
> 
> 
> hi folks,
> 
> I am reading Tom Kemp's _The Climax of  Capitalism: The US Economy in
> the 20th century_. He says that one of the major causes of the world
> economic crisis in the 1970s was inflationary pressures on dollar.
> Then he continues by saying that "although  bearing a family
> resemblance of previous recessions , that of 1974-5, differed  from
> them in one salient aspect: there was no deflation; instead the dollar
> continued to lose purchasing power and prices continued to rise. the
> clearing of ground for recovery by a downward revaluation of assets
> and the lowering of costs, thus restoring the profitability of
> capital, did not happen in the classical manner. What did happen from
> about this time was that plants  that proved unprofitable in the
> recession did not re-open in the boom:de-insdustrialization had begun.
> In response to the declining rate of profit at home, corporations
> sought higher profits by transferring manufacturing facilities to low
> wage countries". (p.184).
> 
> 
> What the cause of  _asian crisis_ compared to above scenario?
> inflation or deflation problem?
> 
> 
> any help greatly appreciated!!!
> 
> 
> bye
> 
> 
> Mine
> 
> 
> 
> --
> 
> Mine Aysen Doyran
> PhD Student
> Department of Political Science
> SUNY at Albany
> Nelson A. Rockefeller College
> 135 Western Ave.; Milne 102
> Albany, NY 12222
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